Becker v. Leonard — 3 N.Y. St. Rep. 765

Majority

p. 765

Nathan Becker, App’lt, v. Jacob Leonard, Resp’t.

(Supreme Court, General Term, Third Department,

Filed December, 1886.)

Headnote

1. Partnership—Assignment fob benefit of creditors—Construction

OF—To INCLUDE INDIVIDUAL PROPERTY.

P. W. B. and W. H. B. contractors, made a general assignment to V. H. if., for the benefit of creditors. The assignment reads “Indenture made the 8th day of January, 1876, between P. W. B. and W. H. B., co-partners doing business under the firm name of P. W. B. and Son, parties of the first part, and V. H. T. party of the second part,” it continues “the parties of the first part are indebted, etc.,” and further proceeds “the parties of the first part * * * do grant, assign and transfer to the party of the second part, all and singular the real and personal estate * * of the parties of the first part * * * intrust to sell, etc., and with the net proceeds * * pay first all the debts ® of the parties of the

first part as such co-partners, etc. Second * * all the private and

individual debts of the parties of the "first part * * * provided the respective amounts of the individual debts of the parties of the first part * * * provided the respective amounts of the individual debts of each of the said parties does not exceed his portion of the surplus.” And provision is then made that no part of the surplus due one partner shall be applied in payment of the debts of the other. At the date of the assignment defendant held part of the individual money of P. W. B., which had been placed in his hands by P. W. B. before the assignment, with a view to withhold it from his creditors. Thereafter defendant paid this money to the assignee. This plain'iff is a judgment creditor of P. W. B. with execution unsatisfied; his judgments were obtained subsequent to the assignment on the individual indebtedness oí P. W. B. existing prior to the assignment; he seeks to reach the moneys placed in the hands of the defendant. Held, that the plaintiff could not recover; the assignment contemplated the appropriation of all the partnership and individual property of each partner first, to the payment of the partnership debts, second the surplus, if any, due each partner, to the payment of his individual debts.

2. Same—Not fraudulent by appropriation of individual property

TO PAYMENT OF PARTNERSHIP DEBTS.

Held, that the assignment is not made fraudulent against the individual creditors of either partner because his individual property is appropriated to the payment of partnership debts.

3. Same—Action against third party for funds of assignor—Assig-

nee NOT NECESSARY PARTY

Held, that it was not necessary to make the assignee a party to this action.

George W. Miller, for app’lt; Hungerford & Hotaling, for resp’t.

In January, 1876, Peter W. and William H. Bain, co-partners, made a general assignment to V.

p. 766

nership and individual.- Youngman accepted the trust and is still acting as assignee. At the date of the assignment the defendant, Leonard, held $1,790.45 of the individual money of Peter W. Bain, one of the assignors. This sum Peter W. Bain placed in defendant’s hands for safe keeping before the assignment was made and with the view to withhold it from his creditors. In August, 1876, the defendant paid this money to Youngman, the assignee.

• The plaintiff is the judgment creditor of Peter W. Bain, with execution unsatisfied. His judgments were obtained in December, 1878, upon the individual indebtedness of Peter, existing prior to the general assignment, and he seeks in this action-to reach the money that was placed in the hands of the defendant by Peter W. Bain.

The trial court gave judgment for the defendant upon the ground that the fund in the hands of defendant passed, by the assignment to Youngman, the assignee. It is obvious that if Youngman acquired by the assignment the-right to the fund, then the- plaintiff cannot reach it in this-action. Crouse v. Frothingham, 97 N. Y., 105 .

The payment of the money by defendant to the assigneedoes not seem to be material; for if the assignee had no title to it, then defendant, notwithstanding his payment, must account for it to the plaintiff, if plaintiff’s title be-established.

The plaintiff insists that the assignment by Peter W and William H. Bain was of their co-partnership property, and not of their individual property, and therefore did not-embrace this fund.

We have carefully examined the assignment and conclude that it does convey the individual as well as the partnership property of the assignors. It is expressed to be an “Indenture made the 8th day of January, 1876, between Peter W. Bain and William H. Bain, co-partners doing business under the firm name of P. W. Bain & Son, parties of the first part, and Vreeland B. Youngman, party of the-second part.” It then recited that “the parties of the-first part are indebted,” etc. The counsel for the plaintiff insists that the assignment is substantially like the one in Morrison v. Atwell ( 9 Bosw., 503 ), which was held not to-include individual property.

The corresponding recital in the case cited is, “the said co-partnership is justly indebted,” etc. This assignment then proceeds, “the parties of the first part * * * do-grant, assign and transfer to the party of the second part, all and singular, the real and personal estate * * * of' the parties of the first part * * * in trust to. sell, etc., and with the net proceeds * * * pay, first, all the; debts * * * of the parties of the first part as such.

p. 767

co-partners, etc.; second, * * * all the private and individual debts of the parties of the first part, * * * provided the respective amounts of the individual debts of each of the said parties does not exceed his portion of the surplus;” and provision is then made that no part of the surplus due one partner shall be applied in payment of the debts of the other.

We think this assignment contemplated the appropriation of all the partnership and individual property of each partner, first to the payment of the partnership debts, and second, the surplus, if any due each partner, to the pay ment of his individual debts. The description of the assignors and the_language of the granting clauses of this assignment are similar to that employed in the following cases, in which it was held that the individual property of the copartners was included. Eastwood v. Ward, 35 Law Times (N. S.), 502; Williams v. Hadley, 21 Kan., 350 ; 30 Am. Rep., 430 ; Judd v. Gibbs, 3 Gray, 539 .

The assignment is not made fraudulent against the individual creditors of either partner, because his individual property is appropriated to pay partnership debts. Each individual partner is individually liable for partnership debts, and so long as he has the disposing power over his individual property he can apply it for that purpose. Smith v. Howard, 20 How. Pr., 121 ; Van Rossum v. Walker, 11 Barb., 237 .

It is the appropriation of firm property to pay the individual debts of the partners that is regarded as fraudulent against the firm creditors. The firm does not owe the individual debts. Wilson v. Robertson, 21 N. Y., 587 .

Here, if there had been provision that the individual debts should be paid out of the entire proceeds instead of out of the surplus, and the individual debts had been unequal, then some of the property of one partner would be appropriated to pay the debts of the other, and hence the assignment would be fraudulent against an individual creditor injured thereby. O’Neil v. Salmon, 25 How. Pr., 246 .

Equity will appropriate partnership property to partnership debts, and individual property to individual debts, and will not permit either class of creditors to appropriate the assets of the opposing class until all the claims of the latter are satisfied. Meech v. Allen, 17 N. Y., 300 . But equity, as the case cited holds, will not supersede the existing hen or disposition which the debtors lawfully made, and therefore will not defeat an assignment made by the individual debtor of his separate property to pay his partnership debts, which is otherwise unobjectionable. Kirby v. Schoonmaker, 3 Barb.. Ch. 46 .

p. 768

The fact that Youngman, the assignee, is not a party is not material to the issues between these parties. In Crouse v. Frothingham, ( 97 N. Y., 105 ), the assignee was made a party, but did not answer. He thereby confessed that he had no title to assert against the judgment-creditor. But the court held otherwise; that the rights Of the creditors represented by him could not be varied at his option and that the title was in him,' for the benefit of all the creditors.

There are other objections urged against the plaintiff’s recovery, but we do not think it necessary to discuss them.

Judgment affirmed with costs.

Learned, P. J., and Bookes, J., concur.

Cases cited

Kirby v. Schoonmaker 3 Barb.. Ch. 46 N.Y. Ch. 1848-02-21 p. 767